Search smh:

Search in:

Group buying sites shed more jobs

Asher Moses

Off the boil? .... market leader Groupon lost over half of its market value in the past six months.

Group buying site Spreets has shed most of its staff hot on the heels of job losses at competitor LivingSocial, but analysts say the $500 million daily deals market is not imploding, just consolidating.

Analyst firm Telsyte said over the past few years the daily deals market in Australia had been whittled down from 80 to 40 sites to today's position where the top eight – Groupon, Scoopon, LivingSocial, Cudo, Spreets, Deals.com.au, Ourdeal and Ouffer – generate 95 per cent of the industry's revenue.

But now the market is struggling to support even that many players with Groupon and Scoopon now accounting for more than 50 per cent of the market and growing.

Spreets founders (left to right) Dean McEvoy, Justin Hammer and Phil Morle sold the site to Yahoo!7 for $40m last year. Photo: Andrew Quilty

Over the past week Spreets has slashed most of its sales staff as it restructures around an “affiliate model” whereby it will be a portal site linking to other sites' deals as opposed to running its own deals with small businesses.

Advertisement

Last week LivingSocial cut 24 staff from its Australian office and 400 worldwide.

“It's the consolidation that we all expected as it's increasingly a harder market to compete in . . . the way I see it there's only space for a few players,” Telsyte's senior research manager, Sam Yip, said.

Spreets owner Yahoo!7 would not confirm the exact number of job losses but said the restructure would allow the site to become “a more sustainable and profitable business”. LivingSocial said its staff cuts were about “refocusing and reinvesting in key growth areas”.

Spreets co-founder Dean McEvoy, who sold the site to Yahoo!7 last year for $40 million before exiting the business earlier this year, told Fairfax he was “shocked and saddened” by the news.

The group buying industry has attracted mountains of complaints and bad press due to shoddy suppliers failing to deliver on deals or being ill-equipped to handle the onslaught of customers.

In just one of many reported examples tens of thousands of customers who signed up via LivingSocial for two pairs of Havaianas thongs for $24 didn't get their orders fulfilled, with some claiming to have received fake Havaianas.

But Yip said the daily deals market was still very much alive and Telsyte expects the industry's revenue to exceed $530 million this year, up from $498 million last year.

“The market is not going down at all because Australians are increasingly seeing online as a discount channel,” he said.

Still, investors at least seem to think the group-buying fad has passed with global market leader Groupon losing over half of its market value in the past six months.

McEvoy, who appears to have cashed in his chips at just the right time, said: “I still think group buying is an amazing model despite the press Groupon has been receiving. It's at least as big as the yellow pages industry and works much better than any other form of local advertising.”

23 comments

Group buying is an amazing model but I think these companies are preparing themselves for deal fatigue.

Deal fatigue is self perpetuated by virtue of consumers realizing that by purchasing daily deals, they're actually not saving money, but being tricked into spending discretionary money that they otherwise would likely never have spent, if not for the daily deal offerings they keep purchasing.

At some point, one realizes they've bought so many daily deals that they actually not saving anything, but rather, expending more money. This is one of the main things that deal fatigue naturally stems from.

Deal fatigue will inevitably be the undoing of most of the daily deal companies.

Commenter

theDiff

Location

Auckland

Date and time

December 10, 2012, 2:43PM

I used to think these group offer sites were great when they sent me 1 email a day with 1 deal relevant to me. As soon as they started spamming me with multiple emails a day cluttered with loads of random crap products that I wasn't interested in, that's when I stopped paying attention. Straight to the deleted folder from then on!

Commenter

Steve-o

Location

Sydney

Date and time

December 10, 2012, 4:23PM

Agree totally with your observations. Same for the Aussie online ‘department’ stores like Deals Direct, TopBuy and Catch of the Day.Noticed most deals and specials are on a regular cycle so never a ‘panic’ to buy now as it will come up again soon enough. Easier to unsubscribe from the incessant emails and just check in on their websites when you choose. Target and Big W have really got their act together with online shopping and lay-by, cheap delivery or pick up at the store of your choice – and that includes everything in their sales and catalogues. I’ve also had good discounts going direct to the company making the offer through sites like Groupon.

Commenter

Jeff

Location

Melbourne

Date and time

December 10, 2012, 4:33PM

Some points:Not sure about others, but we only bought 'deals' that related to something that we would have done or purchased anyway.

You can't protect people from themselves viz: cigarettes, excessive alcohol or gambling etc so this discretionary spending may have been allocated elsewhere anyway.

I've made a point of not going onto any of the sites that ask for your email before you can view the 'deals'. Why should I provide them with anything when I'm only browsing. I've never gone back to those sites and only frequent the ones that are 'open'. (I'm the buyer remember, don't take me for granted or think you can force my hand.)

Commenter

JIM

Location

Bayside

Date and time

December 10, 2012, 5:29PM

I agree totally. But even Australia Post paid people serious cash for Christmas.This remind me a time when Government business was more stable than private.Oh life, Oh life.Where do we go now

Commenter

SJ2400

Date and time

December 11, 2012, 12:06AM

Another problem facing daily deal sites is "seller fatigue": merchants are finding they are not getting a positive return on their daily deal X% off investment. Sure, mobs of customers show up armed with coupons, but few go on to become repeat customers once the discounts end. The daily discount site mantra to merchants of "get them in cheap and they'll return to pay full price" is fundamentally flawed. As long as deal sites keep promoting this party line, they'll continue to flounder.

Commenter

theDiff

Location

Auckland

Date and time

December 11, 2012, 7:23AM

I bought a couple of items from Groupon that genuinely were bargains, but out of the last 3 months of offers emailed to me every day I have bought nothing. The items I have taken an interest in usually have delivery times of 6 to 8 weeks, making it plainly obvious the business behind the offer has no stock and is bulk ordering items direct from China. They probably don't even handle the product before it gets shipped out. The discounts advertised on Groupon of 50 to 80% are usually false. Again, the small direct importer opens a cheap web site offering outrageous prices for a while and then goes onto Groupon offering an 80% saving. Problem is, the 80% off price is now realistic while the full price was ridiculous and nobody was expected to buy at that price.

Commenter

Michael

Location

Adelaide

Date and time

December 10, 2012, 2:59PM

Fully agree. Yesterday buying a present for relatives in the Uk, we googled the product being offered on Groupon and found it being offered cheaper with free postage.

Commenter

JP

Date and time

December 10, 2012, 4:19PM

The sites would benefit from not selling c**p. If they focused on providing interesting offers, you would see more people buying them. There are only so many massages, haircuts, or thai meals one can buy.

Commenter

All_good_names_taken

Date and time

December 10, 2012, 3:09PM

Spreets sound like they have three very happy customers. They sold for $40m and stuck it up Yahoo 7. Wonder if Yahoo 7 can call and complain they didnt get what was promised? Send em an email - No calls please.

Subscribe to IT Pro

Editor's Choice

Prime Minister Tony Abbott has bolstered Malcolm Turnbull's ministerial duties, handing him greater responsibility for e-government in a push to expand the use of a single digital identity for Australians.

Data

The new roof that spans Margaret Court arena does more than keep out the weather. Built into the gantries that surround the sliding ceiling are Wi-Fi antennas that beam web access to every ticket holder.